Managing finances is one of the essential skills that everyone must possess. Schools in India do not have a separate curriculum to teach managing finances or to have a savings plan. But why wait for the school to teach when you can start the financial lessons by taking one-step at a time.
We bring you 9 crucial financial lessons that you must start teaching your kids:
- Start early
Don’t wait for the right age to start teaching your kids about finances. They must know about basic financial transactions from a young age. Inculcating financial discipline is always easier when the kids are young. If they realize the value of money and financial planning from a young age, then it’s likely that they will start learning about the finances early on.
- Practice before preaching
Children pick up a lot of habits from their parents and from immediate family members. Start practicing all the financial lessons that you intend to teach your kids. For example, if you are trying to teach them about spending wisely, tell them how you make your monthly budget and how you keep your budget in check.
- Assign fixed pocket money
Give your kids a fixed monthly pocket money and let them manage their expenditures on their own. Let them learn how to allocate all their money for everything effectively. Your kids will learn to save up and spend carefully and even to not over-spend when you give them a limited amount every month as pocket money.
- Teach how credit works
Teach your kids the concept of liability and tell them how loans and borrowing money works. Explain that while borrowing money or taking a loan in times of dire need is okay, borrowing huge sums which become difficult to pay later is not okay. Also, teach them basic concepts of paying interest and repaying in small amounts.
- Include them in family budgeting
Re-emphasizing the fact that children learn a lot from their parents, involve your kids when you are planning out your monthly budget. This could be an indirect and more powerful way of teaching them about finances compared to directly just telling them how to manage finances which can get a little boring at times.
- Teach them banking and electronic transactions
Take them to the bank or make them sit beside you whenever you are doing an online transaction. This will ease them into the process of opening an account/starting a fixed deposit, understanding electronic transactions, data security and how to safeguard their financial information.
- Make a money schedule
Have a schedule even for the monthly practice of giving pocket money to your kids. In case, your kids are in college and stay away from you, deposit the money on a specific date. Let them plan their monthly spends accordingly.
- Explain taxes
Calculating and paying taxes may seem intimidating if one does not know how taxes work. Start with teaching the basics and then go on to teach slightly complicated things such as tax-saving instruments.
- Give away the responsibility
Whether it’s transferring their account from minor to major or including them in understanding who will be your nominee for life insurance, start giving your kids a little responsibility about important financial decisions.
Teaching money management lessons is not a one-time task, instead, it involves a series of small efforts you make that will slowly and steadily inculcate a financial discipline.